October 12, 2018 | San Francisco Housing Bubble – UPDATE!

Robert Campbell

Robert Campbell is a real estate analyst and economist. He's been publishing The Campbell Real Estate Timing Letter since 2002. His book (Timing the Real Estate Market) presents a clearly defined method for predicting the peaks and valleys of real estate cycles.

[Excerpted from Sept 2108 Timing Letter]

“The two best traits for a good investor,” says Nobel Laureate Robert Shiller, “are to have a deep appreciation of history and a good understanding of psychology.”

To prove it, look at the above chart.

Now ask yourself this: “How many times in history

have you seen markets rise exponentially and then

correct by going sideways?”

If you said “never,” you’re right.

From 2002 to the peak in 2008, Bay Area

housing prices rose 58% — and then plunged by

30% afterwards.

From 2012 to 2018, Bay Area housing prices

find themselves in the midst of another six-year vertical

climb.

This time, however, prices have risen by 89% – not 58%! – and through June 2018, the price trend is still “up.”

Bay Area housing prices in San Francisco City have climbed the most in the last six years. According to the California Association of Realtors, single-family home prices in San Francisco have soared from $620K in 2012 to $1.6 million in 2018 – a 158% rise.

While Bay Area housing prices may go higher than you think, investors should know that extreme valuations tend to be followed by large corrections when a cycle reverses.

The Game of Musical Chairs

Playing the markets is like playing the children’s game of musical chairs.

To be successful, you must secure a seat when the music stops.

While Bay Area housing prices may go higher than you think, investors should know that extreme valuations tend to be followed by large corrections when a cycle reverses.

In fact we’re now starting to see late cycle, telltale signs that the market is slowing.

To our benefit, momentum readings can give us advance warning of the turn.